Pretty much what I am arguing:
Evergrande leaves China’s economy at a turning point
Transition away from reliance on real estate will need deft handling
Masked residents wear a mask while walking through the Evergrande City in Wuhan, Hubei Province, China
Evergrande, China’s largest property developer, is facing a liquidity crisis with total debts of about $300bn © Getty Images
September 24, 2021 4:21 pm by The editorial board
In 2007, China’s then premier Wen Jiabao called the economy “unstable, unbalanced, uncoordinated and unsustainable”. The Evergrande saga has been a reminder to the world of the manifold frailties that still run through the world’s second-largest economy. As the property company stumbles, the crucial question is whether those frailties will drag down the economy. The risks have undoubtedly increased, not just of a slowdown but of permanently slower growth. But there are also options that, if skilfully used, would avert a crisis.
Real estate, which contributes about 29 per cent of gross domestic product, is so overbuilt that unsold apartments could accommodate at least 90m people. As developer sales slump, they have less money to buy land, thus squeezing the finances of local governments, which, in turn, are less able to invest in infrastructure. A property rout, therefore, would disable an engine that has propelled Chinese growth for at least two decades.
Yet such a chain reaction need not touch off an economic collapse. There is a path, though not an easy one, that could carry China through a multiyear transition towards a more sustainable growth model.
The most obvious imbalance to tackle is China’s staggeringly high gross savings rate — 45.7 per cent at the end of last year, more than double US or UK rates. Much of the savings come from high corporate profits that are the mirror image of repressed wages. If Beijing was to engineer a rise in those wages, consumer spending would respond, helping to reorientate the economy away from its over-reliance on capital investments. Another reason for high savings is an imperfect social security net; completing the social security system could also shore up the economy.
China has options, too, for industries it could fire up to compensate for a flagging property sector. High-tech manufacturing and green technologies are both promising. Wind and solar power were until recently subsidised industries, but are now efficient enough to outcompete many thermal installations. China appears on track vastly to exceed a target of 1,200GW of wind and solar generating capacity by 2030.
To prevent its huge property sector from triggering a crisis, Beijing will need an approach that mixes maintenance of demand with a massive restructuring and debt resolution programme. It could achieve at least a measure of the former by rezoning areas of what is classified as the “rural” economy — where property is not tradable — as urban. This could unlock a huge source of latent demand. As for restructuring and resolution, the fate of Evergrande itself in coming months may reveal the way forward.
Each of these transitions is complex. None will be easy to achieve in an environment in which growth, which averaged 7.68 per cent between 2010 and 2019, is forecast to slide significantly. But if China’s executive prowess in the past four decades provides any guide, Beijing may be equal to the challenge.
The biggest danger may not be economic at all. Xi Jinping, China’s ruler, presides over a regime in which honest debate is clearly receding as the trappings of a personality cult proliferate. If sycophantic zealotry is allowed to crowd out reason, and hubris to eclipse calls for restraint, then Beijing could undermine the credibility that will be crucial to the success of any transition. Xi is working in a very different environment from previous generations of revolutionary leaders. If mishandled attempts to fix the property bubble lead to slower future growth, Beijing risks not just investor flight, but losing the support of its population.
Gas crisis shows why we must stop demonising fossil fuels
The engineering challenges around renewables means we need to be realistic while waiting for the green transition
Liv Cleverley illustration of Merryn Somerset Webb column on gas
© Liv Cleverley
September 24, 2021 4:49 pm by Merryn Somerset Webb
The writer is editor-in-chief of MoneyWeek. Views are personal
Earlier this week the online UK supermarket Ocado told its customers that it had “limited ability” to deliver ice cream to them. Why? Because the price of natural gas has soared. That has caused two of the UK’s big industrial fertiliser plants to shut down, as natural gas is the feedstock for ammonia, which is used to make fertiliser. Since carbon dioxide is captured from ammonia production, this has hit the supply of CO2 in the UK. And that has led to a cut in the supply of dry ice that supermarkets use to keep food cool in their delivery vans. So no ice cream.
We can live without ice cream. But what of the other effects? Abattoirs are short of the gas they need to stun animals, hospitals might not have the carbon dioxide they need for minor surgeries, and the nuclear industry is low on the gas they need for cooling. These things really matter. This mini crisis has been fairly quickly resolved, for now at least: the taxpayer is stepping in to subsidise a fertiliser factory for three weeks.
However that doesn’t mean you shouldn’t worry. You should. This incident serves as a timely reminder of just how reliant we are on fossil fuels. Despite our optimistic enthusiasm for wind and solar power, one way or another oil and gas use is shot through every part of our economic and social lives. That will be the case for many decades to come.
In his recently updated book There is No Planet B, Mike Berners-Lee lays out the challenge (and, perhaps inadvertently, the lack of a medium-term solution). When we talk about shifting from fossil fuels to clean energy of one kind or another, we aren’t discussing taking the amount of energy we use now and producing that static amount in a different way. Instead our target is always on the move. The more energy we can get our hands on, the more we use — even if our use of it becomes more efficient.
We use three times as much energy as we did 50 years ago and at current growth rates that will soon double again. Think of this in terms of solar panels. Right now, says Berners-Lee, if we could figure out storage and transmission (which so far we haven’t), we could meet all our global energy needs by covering 0.1 per cent of the world’s land in solar panels. Keep expanding our energy use at 2.4 per cent a year (the 10-year average is 1.5 per cent but in 2018 it was 2.9 per cent) and in 300 years we will need every inch of land mass there is in every country in the world.
In one sense this is a ridiculous way to look at it — we live in a stunning age of innovation and the panels we use today will surely look amusingly archaic in a decade or two. Abattoirs and others can find another solution instead of gas. But you get the point: energy usage is going to keep rising, led by China, the US and India, while energy transitions tend to both take a very long time and never actually end. We just pile new sources on top of old. The world still uses much the same amount of traditional biomass (wood etc) as it did 100 years ago. Even after many years of efforts, coal, oil and gas still make up 80 per cent of our global energy mix, pretty much exactly the same number as a decade ago. We are running to stand still.
This will change. But not as fast as you might like to think. In 2019, 33 per cent of our new power generation needs were met by renewable energy. That’s a start. But 40 per cent were met by natural gas.
There’s urgency here of course — which might speed things up. But there is something else that might slow us down. It didn’t take much to move people to fossil fuels — they are relatively easy to extract, relatively easy to transport, hugely energy dense and efficient and, of course, cheap. Until their externalities were understood, who could possibly have objected? Our current transition is different: people and companies will switch not because the new sources are easier to access, cheaper or more energy dense but because regulation mandates that they must.
Either way, the truth is that whether we like it or not our energy transition involves long term reliance on fossil fuels. That means that we should stop demonising them — evangelising about ESG, following the trend to divest from shares in oil companies and kiboshing new projects with regulation, high financing costs (many banks are pulling back from the sector) and the like. Instead we should focus on making their extraction cleaner and more efficient while we wait for the engineering challenges around a renewables-led future to be solved.
If we don’t do this — if we allow ourselves to be beguiled by the idea that solar is so advanced that we no longer need filthy fuels to have ice cream, we will find the future held back by needlessly expensive energy — and almost certainly ice-cream free. Some reckon that the global population will gladly slash their energy use and pay a “greenium” for the energy they do use. I’d say anyone who believes that has never been on the customer services desk at Ocado, or asked someone in India whether they would like the same average living standard as the average European or, for that matter, received their latest gas bill.
AUKUS alliance: Morrison has seated Australia at top table of diplomacyPAUL KELLY
Scott Morrison and Joe Biden in the US this week. Picture: AFP
Scott Morrison and Joe Biden in the US this week. Picture: AFP
12:00AM SEPTEMBER 25, 202151
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The story this week was not France but China. While the media cycle was dominated by French fury, history was being made in Washington with the emergence of two strategic entities that will shape the Indo-Pacific – their purpose being to constrain Beijing’s power, assertion and ambition.
Australia is now at the centre of these geostrategic shifts. While the media story was about Australia’s diplomatic debacle with French President Emmanuel Macron, the legacy of Scott Morrison’s US visit will be strategic initiatives that shape Australian foreign and defence policy for decades under Liberal and Labor governments.
Contrary to the media reports, Australia’s influence in the Indo-Pacific is growing, not receding. Morrison is persona non grata in Paris but feted in Washington. It would be nice to dream he could be feted in both capitals but that was never possible.
The international reaction to AUKUS is more positive than negative, a reality obscured by the French trauma.
The US decision, along with the UK, to provide Australia with nuclear-powered submarine technology –along with a range of capabilities concerning cyber, AI, quantum and hi-tech offensive warfare – is an event of global and regional significance.
On display has been the power of America’s alliance patronage for those granted it, witness Morrison, and those briefly jilted, witness Macron.
READ MORE:Xi is the real creator of AUKUS and Quad unity
The big picture take-out from this week – looking beyond the confusing cross currents of anger and co-operation – is President Joe Biden’s determination to contest the China challenge with new diplomatic and strategic commitments. Biden is sending a global message post-Afghanistan.
These US commitments were on display first with Morrison winning support from the American political system for the new three-way AUKUS defence technology partnership and, second, in the inaugural person-to-person leadership level meeting in Washington of the Quadrilateral Security Dialogue involving the US, Japan, Australia and India.
“Today, Australia received overwhelming support for our AUKUS partnership,” Morrison said on Wednesday after meetings with Biden, US officials and congressional leaders. “President Biden gets it, the congress gets it, the Senate gets it. And that is a great encouragement to Australia. They understand the challenges we’ve been facing.”
He said there was “overwhelming support” for Australia “to establish a new submarine fleet” with bipartisan backing on Capitol Hill. He called the political grouping of the Quad and the defence partnership of AUKUS as “completely complementary”. He said this was view of India’s Narendra Modi and Japan’s Yoshihide Suga. In short, the two entities reinforce each other, one political, one strategic. Morrison runs an “everybody gains” message, while China escalates its threatening rhetoric.
Macron’s anger is spread wide – towards Australia and the US. He is rightly angry with Australia for breaking a contract. But he is angry with Biden for another reason – for not appreciating France’s commitment to the Indo-Pacific given its troops, territories and money in the region. Macron was insulted not just because he wasn’t told, but because France’s Indo-Pacific strategy wasn’t recognised, in some form or another, in Biden’s agreement on AUKUS.
Macron wants to be part of the action. He will forgive Biden long before he forgives Morrison.
The Biden-Macron midweek reconciliation phone call agreed the AUKUS decision would have benefited from “open consultation among allies”, and France is now returning its ambassador to Washington. But there is no Macon-Morrison call. The Australia-France freeze may last a long time. That is a significant negative. But claims Morrison should have briefed the French before AUKUS was finalised and announced are nonsense – Macron’s subsequent reaction proves that, if notified, he would have acted in protest or to thwart, hence the imperative for secrecy.
As for Morrison, there are two false views of his policy: that it constitutes an unprecedented breach of sovereignty; and that it involves a turning away from Asian engagement. The multi-level structure being set up through AUKUS and the Quad is not about mutual exclusivity – it both deepens Australia’s alliance with the US and it deepens networks of co-operation within the Indo-Pacific.
Morrison’s central objective throughout has been to secure a fully engaged Biden administration working in collaboration with the region to balance the assertive tactics of Beijing and, in the long run, to ensure the region does not succumb to Chinese primacy based on its authoritarian model.
The AUKUS agreement is a transformative departure in US thinking – offering nuclear submarine technology to another nation, in this case Australia. At home it is a near revolutionary event for the centre-left of politics with the ALP leadership, shadow cabinet and caucus endorsing in principle nuclear-powered submarines for Australia.
Kevin Rudd and Paul Keating are sirens of outrage. But have no doubt, Labor is locked in. The decision is taken. If Anthony Albanese wins the election, a new Labor government will preside over a transformed world – a program for nuclear-powered subs and a deeper integration with US war-fighting technology, with the Greens in perpetual anger and a fracture with much of the Labor rank and file.
The four senior ALP figures who were briefed a fortnight ago – Albanese, Richard Marles, Penny Wong and Brendan O’Connor – are all committed. They are explicit: they accept the capability argument for nuclear subs. That Albanese and Wong are lions of the left helps. There were no dissident voices in the shadow cabinet.
In the interim, Labor is desperate to build product discrimination from Morrison. In political terms Labor, cannot leave the impression it is rolling over before Morrison while, in fact, it is accepting his agreement. That means attacking his diplomacy, the breach with the French and raising the multitude of unanswered questions since this is only an in-principle agreement with no decision yet on the actual boat.
This quest for separation was on display in Wong’s Thursday speech to the US Studies Centre. Wong said “we accept the advice provided” on the case for nuclear submarines. But she then asked whether Australia would control the technology, and capability and even asked whether with the nuclear submarines “we can act alone when needs be” – the Keating point.
This is a valid question about autonomy but gives Morrison scope for political retaliation. His lines were potentially deadly. Morrison said there was “bipartisan support” for AUKUS in America yet within days the Labor Party “seems to be having an each-way bet”. Ramming home the proposition, he added: “I don’t have each-way bets on national security.”
Labor walks a fine line. It cannot criticise so much it gifts Morrison with a credible argument that Labor doesn’t believe in the deal. A national security divide over AUKUS would be Morrison’s election dream. Labor, presumably, will ensure that it doesn’t happen.
Bipartisanship is an essential condition for this epic Australian project. It demands a national effort on a scale we have not seen before. Former secretary of defence Dennis Richardson, who presided over Defence’s recommendations for the French sub in 2016 and who supports the new deal, told Inquirer: “This will be the most difficult and complex defence program that this country has ever undertaken by a factor of 10.”
Whoever wins the next election – Morrison or Albanese – will face an unprecedented test of our governance, industry, organisational and defence force ability. Existing norms, structures and thinking won’t suffice.
There are two certainties. First, defence spending must rise relentlessly over the next 20 years far above 2 per cent of GDP.
Morrison has made this clear. Asked by Inquirer, Wong said the need for increases in the defence budget had “bipartisan support”. Nuclear submarines will place a greater burden on the budget than conventional submarines. The Australian public will be supportive until it realises the price to pay – at which point the costs will face resistance from a public opposing any reduction in its social benefits.
Second, the 18-month review set up by Morrison must tackle the formidable problem of the submarine capability gap out to 2040 – when the nuclear submarines begin to enter the water. It appears the AUKUS agreement doesn’t directly address the gap. Defence Minister Peter Dutton told Sky News that Australia could look at leasing or cutting a deal for US nuclear subs in the interim. But that’s an extremely hard task. Another option is for the UK to station some nuclear submarines in Australia, an option that Morrison kept open when asked.
Frankly, this “gap” seems wide open. The Collins-class submarines will be revamped. But the government, now the AUKUS agreement is done, will face immense pressure to secure some nuclear presence in the “gap” period. How hard is this in technical and management terms? Richardson highlighted the problems: “The first challenge is the absence of trained and skilled personnel in the nuclear submarine area. We have virtually no such high-end skills in Australia.
“We will need those skills and experience in the actual program to get the damn thing built. We will need to get a lot of that expertise from the US and UK but even in those countries those skills are in relatively short supply. We will then need a trained crew.
“Most of the captains of the US nuclear-powered submarines have PhDs or qualifications in the nuclear area.
KARA SWISHER AT THE NYT: THIS LADY IS...A CHAMP!
Will Lawmakers Finally Act Against Big Tech?
Sept. 24, 2021, 8:51 p.m. ET
Credit... Illustration by The New York Times; Photography via Getty
Kara Swisher
Opinion Writer
Kids and whistle-blowers. This is the heart of the recent Wall Street Journal series of investigations about how Facebook runs its business. And it’s why the articles landed with such force.
Jeff Horwitz, one of the Journal reporters who penned the devastating “Facebook Files” series, and Cecilia Kang, who with fellow Times reporter Sheera Frenkel wrote the recent book “An Ugly Truth” about Facebook, joined me this week for a social audio discussion on Twitter Spaces.
We talked about The Journal’s reporting on the toxicity of Instagram on the psyche of teenage girls, supported in the stories by internal Facebook documents. Kids and whistle-blowers have now given politicians and regulators a very clear target, one that resonates with the public.
Finally, slow-moving regulators may have some much-needed fuel.
This story will continue to unfold in the coming days. Facebook will be sending its global head of safety, Antigone Davis, to Senate hearings about kids’ safety sometime next week, which should be made livelier by the revelation that a whistle-blower who gave documents to The Journal has also turned over a pile to lawmakers and will go public at some point soon, according to Senator Marsha Blackburn, a Tennessee Republican. This person is reportedly seeking federal whistle-blower protection.
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I often cringe at Blackburn’s ignorant claims of anti-conservative bias at social media companies — on social media, of course — which, so far, have no basis in fact. But it appears she has now set her sites on a problem that is actually supported by evidence: the dangers for children online. She and Senator Richard Blumenthal, a Connecticut Democrat, have joined together in this endeavor, as they did this summer on proposed legislation around app stores that seeks to throttle back the power of Apple and Google.
I would not have imagined such a pair cooperating so much. And the combo of bipartisan, the-kids-are-in-danger and we-have-your-possibly-incriminating-documents-right-here must have Facebook nervous. Hopefully, the tired trope that government is incapable of legislating and regulating tech is over.
But it’s critical that the Senate committee widen its gaze — and subpoenas — to include other tech giants, like Alphabet’s YouTube, a point Facebook also makes. All of Big Tech needs to be pressed on safety by regulators or it just becomes a pile-on on Facebook. It’s easy to paint Facebook as the only villain, but that is just not fair.
And as you can see from Apple’s recent missteps around monitoring its devices for child pornography — which is about balancing privacy and the need to thwart criminals — tech companies should be attentive to lawmakers’ concerns, since they won’t slip out of scrutiny so easily this time, as they have so often in the past over different issues.
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One thing is certain: Whistle-blowers will continue to play a key role in this story, especially if regulators want to get some traction. There are scads of people inside tech companies who are worried about the massive power amassed by Big Tech, and increasing numbers of tech insiders want to make sure that their creations do not have a deleterious impact on society.
Despite the common belief in Silicon Valley that leaking is a bad thing, in some cases it is the only thing. Horwitz, The Wall Street Journal reporter behind the series, and Kang both told me that they get tips and documents only when insiders lose hope that they can make change happen internally. And, in my experience, those who leak are not typically disgruntled but frustrated that their best work is being sullied by careless or even malfeasant leaders.
Many years ago, a top Yahoo executive who was exasperated by all the internal information I was able to access at her company called me to ask why people leaked to me.
My answer: Because she wasn’t listening to them — but she sure as heck listened to me.
And they’d all better listen when lawmakers start talking next week.
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China moves against crypto
As I wrote recently, China is cracking down on tech, and today it made another big move by hitting hard at the fast-growing (yet still nascent) cryptocurrency sector. The People’s Bank of China put a Q&A on its website that essentially declared the use of digital currency illegal.
You read that right: illegal.
“Financial institutions and nonbank payment institutions cannot offer services to activities and operations related to virtual currencies,” the central bank said. China already moved earlier this year to crack down on cryptomining.
It’s a big blow to the freewheeling sector, and a sign that the Chinese government will not tolerate any other entity grabbing a critical means of social control. No surprise, the value of Bitcoin, Ether, Litecoin and even Dogecoin dropped. Companies that service the crypto sector, including Coinbase, were also down.
It makes noises from the U.S. government seem minuscule in comparison. Earlier this week, in a Washington Post virtual forum, Gary Gensler, the Securities and Exchange Commission chair, said, “I don’t think there’s long-term viability for five or six thousand private forms of money. So, in the meantime I think it’s worthwhile to have an investor-protection regime placed around this.”
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Gensler has taught a class in cryptocurrency at the Massachusetts Institute of Technology, but he’s proving to be not much of a fan. He has also taken to comparing the crypto market to the Wild West, sounding like a sheriff who is about to take some of the bad guys down at the saloon.
But it’s all hat and no cattle so far, especially compared with the Chinese. We’ll see what Gensler has to say at my event next week, where we’ll ask him about that and more.
And I quote:
"It’s a big blow to the freewheeling sector, and a sign that the Chinese government will not tolerate any other entity grabbing a critical means of social control. No surprise, the value of Bitcoin, Ether, Litecoin and even Dogecoin dropped. Companies that service the crypto sector, including Coinbase, were also down.
It makes noises from the U.S. government seem minuscule in comparison."
https://www.theaustralian.com.au/inquirer/xi-jinping-is-the-real-creator-of-aukus-and-quad-unity/news-story/f49a39b980bc8deed2ef55d45a99e888
From a sociotheoretical standpoint, this kind of"analysis", if you must dignify it, is almost histrionic if not laughable. But if you dug deeper, if you only scratched the surface, you would unearth a myriad deep-rooted truths - or rather, social diseases that are eating away at advanced capitalist society.
Xi Jin Ping may not be a social theoretician, but a glance at his biography will tell you that he had a visceral understanding of what is happening to Chinese society as the West begins to infect it. Call it "the Hollywood virus" or syndrome. He is a beast, but he is fighting for his country; that much we should grant him.
Who will fight for our "country" when even the finest minds can perceive only shadows?
https://www.theaustralian.com.au/inquirer/beware-pandemic-of-narcissisms-insidious-spread/news-story/2ee577b813910fbf3c940b6f55d4f9ec
It’s “the Netflix Syndrome” now, of course; far more insidious than Tinseltown ever was… The bourgeoisie revels in this muck because superficially it makes its rule extremely easy: you don’t even have to let them eat cake; a helping of Tik Tok will do. But underneath it all, a volcano of lava is swelling: an eruption may be imminent…
This gem in the Katrin Kelly piece, which explains why I think TheAge is fundamentally subverting our society:
“Melbourne, though, for this cohort, is the jewel in the crown. It offers the most reward for effort. This is because of heavy media focus on our state. Relentless criticism engenders contempt and creates a permissive environment where such behaviour can take place. Focus and heightened coverage of the protests confirms the prevailing narrative, provides the reward of attention to activists, increases the criticism and contempt, and around the cycle goes.”
This in today’s Post:
“Despite its desire to move on, Facebook keeps getting pulled back. The company faces antitrust bills in Congress, the FTC’s anti- trust case that was refiled by the agency in August and impending laws in Europe and India that could undermine the business models and products of social me- dia companies. This month, the Wall Street Journal reported that company executives understood and had research proving exactly how toxic the site is, including regarding coronavirus misinfor- mation and the effects of Insta- gram on teenage girls.
The metaverse strategy — con- ceived before the recent surge of bad news — has astonished some observers. One of the people com- pared the strategy to confronting a California wildfire by encourag- ing people to visit Hawaii instead.
“A lot of companies at this point would be sending sort of concilia- tory signals both to Washington and to the public at large,” said Paul Barrett, deputy director of the NYU Stern Center for Business and Human Rights. “But Mark Zuckerberg is now saying, ‘We’re setting out to conquer new swaths of the digital world and remake the digital world.’ ”
In less than a decade, Facebook has gone from an icon of Ameri- can innovation to the symbol of how technology platforms have produced a litany of social harms.”
From the Post:
“Facing collapse under a moun- tain of debt, giant Chinese prop- erty developer Evergrande kept silent on Friday after missing a key interest payment, as the group struggles to restart home building in China and the gov- ernment warned it against caus- ing instability.
By Friday afternoon in Asia, the group had not released any statements about a $83.5 million interest payment on an offshore bond that was due on Thursday. Bondholders confirmed to Bloomberg News that they had not received the transfers on time. The terms grant a 30-day grace period before a missed payment counts as a default.”
The Lightning port isn’t about convenience; it’s about control
The iPhone doesn’t have USB-C for a reason
By Chaim Gartenberg on September 24, 2021 2:05 pm
Photo by Amelia Holowaty Krales / The Verge
If you buy something from a Verge link, Vox Media may earn a commission. See our ethics statement.
The European Commission shook the iPhone world to its roots this week, announcing a new policy that would require all smartphones to adopt USB-C ports for physical charging in an effort to reduce e-waste.
Apple, of course, doesn’t offer a USB-C iPhone, having argued to the European Commission in the past that “Legislation would have a direct negative impact by disrupting the hundreds of millions of active devices and accessories used by our European customers and even more Apple customers worldwide, creating an unprecedented volume of electronic waste and greatly inconveniencing users.”
APPLE OBVIOUSLY PREFERS LIGHTNING TO USB-C
Switching to USB-C, Apple says, would actually be more wasteful than sticking with Lightning, since customers would need new cables and adapters — despite the fact that Apple already offers USB-C ports on its iPads and its MacBooks and has managed to switch over those popular products without major issues or customer revolts.
Notably absent from Apple’s argument, though, is the fact that cutting out a Lightning port on an iPhone wouldn’t just create more e-waste (if you buy Apple’s logic) or inconvenience its customers. It also means that Apple would lose out on the revenue it makes from every Lightning cable and accessory that works with the iPhone, Apple-made or not — along with the control it has over what kinds of hardware does (or doesn’t) get to exist for the iPhone and which companies get to make them.
Apple’s MFi program means that if you want to plug anything into an iPhone, be it charger or adapter or accessory, you have to go through Apple. And Apple takes a cut of every one of those devices, too.
Want to connect an external display? You’ll need an Apple-approved adapter. Import photos and videos from an SD card or flash drive? An Apple-approved adapter. Want to use a DAC to take advantage of Apple Music’s new hi-res lossless audio? Again, you’ll either need an MFi device or an Apple-approved USB dongle.
The same, of course, isn’t true of Apple’s USB-C-based devices, which have a robust ecosystem that can broadly be defined as virtually every product that uses USB-C. With a USB-C iPad, you can simply plug in flash drives and keyboards and displays and any number of useful additions that make those devices better. Apple even made a point of that fact during its latest keynote when announcing the new iPad Mini. And of course, USB-C iPads can be charged by any standard USB-C cable that’s capable of putting out enough wattage.
The European Commission's rule could theoretically do the same for iPhones by forcing into existence the USB-C iPhone that Apple has adamantly refused to make thus far. But the new change may mean that Apple could shift towards (or accelerate its plans for) a completely portless iPhone instead. Rather than give into USB-C ports, the company could eschew ports entirely in order to shift customers towards using its proprietary charging methods.
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The EU’s USB-C proposal might give us a portless iPhone instead
It’s the sort of solution that seems obvious — it’s practically an intentional loophole in the EU policy — until you consider how little sense a portless iPhone makes, absent Apple’s desire to defend its accessory fees and ecosystem control.
Switching to USB-C, a standard that’s used by virtually every other major tech product (including many of Apple’s own, like its recent MacBook and IPad lineups) would make sense. The iPhone is possibly the most popular device in the world that uses a proprietary charger, and a switch to USB-C would simplify charging setups for the millions of iPhone owners around the world. And USB-C would still allow for similar waterproofing, data transfer, and charging speeds compared to Lightning (as evidenced by any number of Android phones or Apple’s iPads.) There’s a reason the European Commission is looking to institute the new change, after all.
If the EU allowed Apple to stick with Lightning, keeping that standard around also makes a certain amount of sense, even if it’s frustrating to those (like me) who would prefer a more unified charging standard. Lightning is an established ecosystem that millions of customers already have cables for, with fast data transfer and charging speeds. Like USB-C, it offers waterproofing capabilities, and it gets Apple both its licensing fees and ecosystem control.
But a portless iPhone that relies on MagSafe (or another wireless standard) is a baffling proposition. It would force millions of customers to have to switch to new chargers, generating tons of e-waste in the process. The result of all that cost and effort would be a charging and data transfer system that is slower and less power efficient in every way compared to wired cables, while also being larger and bulkier than a Lightning or a USB-C wire — just compare the size of one of Apple’s MagSafe cables, or the smallest Qi wireless charger, to a regular wired plug.
APPLE COULD WEATHER A SWITCH TO USB-C JUST FINE
Apple is a $2.4 trillion company; it likely would be just fine without the revenues it gets from Lightning cable fees, should it switch to USB-C entirely. After all, there’s still plenty of proprietary Apple chargers and technologies out there to license, too, like MagSafe, AirPlay, Find My, or the rumored new magnetic laptop chargers that may be in the works for later this year.
But profits aside, a switch to USB-C would mean relinquishing another piece of control over what iPhone owners can do with their devices outside of Apple’s carefully curated walled garden. And that, as we’ve seen time and again, is something that Apple is loath to allow.
I WILL NEVER BUY ANOTHER MICROSOFT OR APPLE PRODUCT FOR AS LONG AS I LIVE
Windows 11 Feels Like a Rejection What Windows 10 Stood For
By Joel Hruska on September 24, 2021 at 11:05 am Comments
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Every version of Windows has emphasized different traits and ideas and, in that sense, could be said to have a personality. In several cases — Windows 7 and Windows 10, most notably — one could fairly argue that the dominant theme of the then-new OS was “All the under-the-hood improvements of Vista / Windows 8 that you liked, without the UI you loathed.”
To the extent that Windows 11 has an identity, it’s an exclusionary one. The dominant discussion around Windows 11 since Microsoft announced it has been around who can run the OS and who can’t. The gap between announcement and launch is also much smaller than in past cycles; the typical gap between an OS announcement and its launch is a year and more. Microsoft announced Windows 11 in June and is shipping it in October.
Microsoft has certainly course-corrected before; Windows 10’s UI was partly an apology for Windows 8. But Windows 11 goes farther than a UI overhaul. Windows 11 rejects Windows 10’s entire self-justification and the associated arguments Microsoft made in 2014 and 2015 about what the future of the PC ecosystem looked like.
When Microsoft announced Windows 10, it declared that the OS would be deployed on as much hardware as possible, as widely as possible. The OS’s minimum requirements would remain mostly identical. Most, if not all, of the systems running Windows 7 could automatically upgrade to Windows 10.
According to Microsoft, Windows 10 was the last version of Windows. The company made this point repeatedly in its marketing strategy. Windows 10 was the beginning of Windows-as-a-service and the effective end of the old software distribution method. In the future, OS updates would arrive seamlessly and automatically. There’d be no need to care which version of Windows you were running because everyone would be running the same version. There’d be no need to worry about OS compatibility in the future because if your device ran Windows 10, it ran Windows 10.
Google and Apple deliver updates somewhat similarly, but neither company has ever implied it will launch the “last” version of Android or iOS, in any way, shape, or form. Microsoft leaned into this point, hard. The various OS releases Microsoft has done over the years each has its own end-support date, feeding the narrative that Windows 10 updates would arrive in perpetuity as an ongoing process, not as discrete events.
I’m sure there were people who didn’t believe Windows 10 would be the last version of Windows. I didn’t. But Microsoft sure the heck seemed to, based on how much effort the company put into that messaging. Windows 10 was the last version of Windows. Windows 10 could run on anything. The implied future of computing, therefore, was one in which a device that could run Windows 10 today could be broadly assumed to be capable of running the latest version of Windows until it physically died.
This may have been bad messaging, but it’s the message Microsoft pushed and the expectation Microsoft set. The company was so committed to shoving people onto Windows 10, it deployed an application it later admitted was effectively malware in an attempt to force people to switch. Microsoft wanted people to use Windows 10.
But Windows 11? Not so much. Windows 11 appears to come with a waiver now to make certain you don’t try to run it on the wrong hardware.
(Image: The Verge)
There’s nothing new about operating systems only running on relatively new hardware. Windows 95’s hardware requirements were much more stringent than Windows 3.1. Windows XP required significantly more horsepower than Windows 95. There was a time when the need to upgrade hardware in order to run software was expected and accepted, if never beloved.
Microsoft changed the market expectation that new operating systems required new hardware by maintaining and emphasizing compatibility with old equipment. Windows 10 will run on equipment that ran Windows Vista. Children born the year Vista launched have entered or are about to enter high school [and…you just gave your editor a heart attack. -Ed]. Windows 11 offers no rationale for this change and does not include features that require it, save for the fact that Microsoft wants it to.
Microsoft Hasn’t Done the Work to Justify the Cutoff to Consumers
I’m not going to say it’s impossible for Microsoft to sell security as a reason to upgrade one’s PC, but it’s not easy. “Install this software update and your PC will stop crashing” is a message that practically sells itself. “Install this software update so that the security attacks you aren’t dealing with 99 percent of the time happen even less” is not.
The problem with cutting off OS support as tightly as Microsoft has is that it sends two conflicting messages. On the one hand, Microsoft is claiming that PCs bought as recently as three years ago are unsafe in some fashion and must be replaced. On the other, it’s promising to keep Windows 10 support running until 2025.
Microsoft is claiming that TPM support will make PCs more secure, but it can’t point to any widely-known critical threats that would have been stopped by TPM. It can’t articulate a concrete benefit that will arrive with TPM support because supporting a TPM module isn’t like having an extra CPU core or a faster graphics card. Invisible protection doesn’t get noticed the way introducing new features or resolving major problems does. The fact that security upgrades are difficult to market doesn’t make them less important, but this would be a much easier swallow if Microsoft hadn’t spent six years telling people they could run Windows on practically anything they wanted.
Microsoft can’t claim that Windows 10 machines are subject to a vast array of security threats without indicting its own product, as it’s the manufacturer of Windows. It can’t build on the momentum behind a new API launch the way it did with DirectX 12, because there isn’t one. Specific features like DirectStorage are not unique to Windows 11. It’s stuck trying to sell people on security without having any real security problems to sell on.
When Microsoft launched Windows 10, it flung the doors as wide as possible and invited anyone with silicon that could still boot to join the eternal Windows 10 party in which updates would arrive seamlessly, invisibly, and without you having to care. With Windows 11, it’s flipped the script upside down. Now, you have to care about whether your PC supports a hardware standard that enthusiasts may have reasons not to use, all so you can download a new version of an operating system that Microsoft previously swore it didn’t need to update this way.
The larger Windows-as-a-service model isn’t going away — the fact that Windows 11 centers advertising is proof of that — but Microsoft has apparently given up on the idea that the entire PC ecosystem ought to be using a single version of Windows. Given that this concept was central to Windows 10, it’s a rather surprising repudiation of a strategy the company previously made central to its entire image. In 2015, the OS was tailored to run on your hardware, no matter how much that hardware sucked. In 2021, your hardware is expected to be tailored for the OS. It’s fair to note that this is more or less a return to the historic status quo, but Microsoft is the company that spent years telling people that the old status quo no longer applied.
ESSENTIAL READING: HOW GREENIES WILL RUIN AUSTRALIA
Europe’s renewables generated energy crisis
Matthew Warren
The Continent’s gas shortages and skyrocketing prices are a warning about taking a politics-over-engineering approach to climate change.
Europe has stumbled into a serious energy crisis, largely of its own making. It is heading into winter critically short on gas reserves, sending energy prices skyrocketing, threatening to shut down industrial production and imperilling its post-COVID economic recovery.
It should come as no surprise. Europe’s “sudden” energy fragility is the result of the same misguided politics-over-engineering approach to climate change that sent California into rolling blackouts last summer. Only on a much grander scale.
Europe has built around 360 gigawatts of wind and solar generation. That’s more than six times the capacity of Australia’s National Electricity Market. Getty
When you are rich and organised, you shouldn’t run out of energy. Energy security is a strategic priority for all functioning economies, up there with food and water. Energy has motivated key flashpoints in modern history: Pearl Harbour, the Battle of Stalingrad, the Suez and oil crises and two Gulf wars.
It might be that one way to manage the tail risks of big renewables is to keep some old coal generators operational and run them in emergencies.
Crisis should demand critical self-reflection. So far only excuses have been offered: blaming Russia like a Bond villain, or suggesting that Europe was the helpless victim of a “perfect storm” of weather and global events, as if there was nothing policymakers could have done to keep its citizens warm this winter.
Europe has been the global leader on a coordinated policy response to climate change. It started trading emissions in 2005 and has built about 360 gigawatts of wind and solar generation – that’s more than six times the capacity of Australia’s National Electricity Market.
This aggressive push into renewables has been a statement of intent about climate change. More local generation was also a way to improve energy security. Europe still imports about 60 per cent of its energy as fossil fuels, much of it from Russia.
The first cause of this crisis appears to be energy planners underestimating the contingency, or tail risk of running big renewables.
Renewables generation is more farming than industry. Wind and solar generators have good days and bad days, bumper seasons and lean ones. Wind energy currently supplies about 20 per cent of Europe’s electricity.
This year European wind farms experienced months of unusually low winds. This required an unexpected run down of gas reserves to fill the gap. Utilities held off buying replacement gas because prices were too high, driven by even stronger demand for gas from Asia. So they waited while prices went even higher.
This response was exacerbated by European co-dependence on energy. One of Europe’s advantages is it is densely populated and highly interconnected. Local short-run energy shortages can normally be solved by importing from your neighbours. But not when everyone is short.
California had this problem during last summer’s heatwaves. Its policymakers had also been shutting down large thermal power stations, replacing them with renewables and gas, assuming they could top up electricity from their neighbouring states when needed. The trouble was their neighbours in Arizona and the Pacific North-west had been closing switching to gas and renewables too. When summer heatwaves peaked demand, California simply ran out electricity.
The fragility of Europe’s energy supply has been exacerbated by the narrowing of its fuel options. To great political fanfare, about half of Europe’s high emissions coal generators have been closed. Germany also closed half its zero-emissions nuclear reactors after the Fukushima accident and will close the rest next year.
The idea of carbon pricing, as Europe has done, is for governments to limit emissions and let markets work out how to do it. By intervening in the closure of generators themselves, coupled with the absolutism of capital providers on even owning coal, European governments constrained the utilities’ engineering options.
It might be that one way to manage the tail risks of big renewables is to keep some old coal generators operational and run them in emergencies. It’s the total emissions that matter.
To make matters worse, new oil and gas development in Europe has been actively discouraged by governments and investors, seemingly oblivious to their critical role in supporting renewables. In January the president of the European Investment Bank, Werner Hoyer, announced “gas is over”, without a hint of irony.
The Dutch government is now considering reopening onshore gas fields planned for closure by 2023. Remaining coal generators across Europe have ramped up output, driving Europe’s carbon price to nearly $100 per tonne, putting further upward pressure on electricity prices.
This is my CENTRAL THESIS about the decline of capitalism into "Feudalism" led and caused by Big Tech:
"Renewables generation is more farming than industry. Wind and solar generators have good days and bad days, bumper seasons and lean ones. Wind energy currently supplies about 20 per cent of Europe’s electricity."
Like tourism and all "service industries", Big Tech is like farming, IT IS NOT INDUSTRY! Because it assumes and enforced self-referential, closed-loop demand! That is, demand that IS NOT AUTONOMOUS! BIG TECH REQUIRED AND ENFORCES THE ELIMINATION OR SUPPRESSION OF CLASS CONFLICT IN INDUSTRIAL PRODUCTION THROUGH THE SUBJECTION OF CIRCULATION!
Because production no longer originates from conflictual, antagonistic worker ("household") demand, investment is no longer "capitalistic" because there is no "expanded reproduction" or "accumulation of surplus value". Essentially, as in Japan, the economy becomes STAGNANT and enters a cycle of decline.
Big Tech merely collects RENTAL PAYMENTS through monopolistic control of consumption that then limits the scope of demand and therefore also of production.
Important to realise that Big Tech is a symptom and the main effect of industrial capitalism reaching its limits of overpopulation and overconsumption, both of which are required for the extraction of profit or surplus value (as expanded control over living labour) -, limits imposed by environmental crises, the depletion of natural resources. This depletion is an insurmountable barrier to capital because its existence (the efficient use of scarce resources that is the major apology for capitalism) is a pre-requisite for the existence of capital: the enforced turning of shared resources into "scarcity".
Impressive note from The Pain Report. I can't BELIEVE no one noticed that "the T word" had gone AWOL in Powell's speech! So why do we pay all these "analysts"! Shameful neglect!
The WSJ article on Mao cited in the Report I already lined to you last week. Very interesting graph on housing and contagion! This fanciful idea that somehow Evergrande is "insulated" from the financial credit pyramid and from the wider Chinese economy displays an UTTERLY CONTEMPTIBLE DISREGARD of the structure of credit finance and of the history of financial crises and PANICS!
Greg Sheridan in his excellent review today:
"Today Keating is a sad caricature, almost a mirror reversal, of his old self. For Australia to possess nuclear-powered submarines, in which the reactors would not need servicing for the entirety of their 35-year life, makes us better able to defend ourselves and enhances our sovereignty."
"A sad caricature" says it all for me. https://www.theaustralian.com.au/inquirer/xi-jinping-is-the-real-creator-of-aukus-and-quad-unity/news-story/f49a39b980bc8deed2ef55d45a99e888
It's fair to say that Xi and the CCP are nowmlwading China on a suicide mission.
In this piece, Krugman says what Pettis and I have been saying for years. The difference is that now Krugman is beginning to suggest - joining the likes of me in the process - that the same "bubble" phenomenon is affecting the West! I call it "reversion to feudalism".
PAUL KRUGMAN
Wonking Out: This Might Be China’s ‘Babaru’ Moment
Sept. 24, 2021
Credit...Jade Gao/Agence France-Presse — Getty Images
Paul Krugman
By Paul Krugman
Opinion Columnist
OK, who ordered that? You’d think that between Covid-19, climate change and U.S. democracy under siege, we would already have enough crises on our plate. A potential Chinese financial meltdown is the last thing we need. Yet here we are.
The story of the moment is Evergrande, a huge, heavily indebted real estate company that appears on the edge of default. The echoes of the global financial crisis 13 years ago are obvious.
The conventional wisdom is that Evergrande isn’t another Lehman Brothers, that any fallout from its woes, and more broadly from the woes of Chinese real estate, can be contained. But that too raises disturbing memories: Some of us are old enough to remember when all the Very Serious People insisted that the fallout from the U.S. subprime debacle could be contained too.
Still, suppose that the conventional wisdom is right and that Evergrande isn’t another Lehman moment. That still won’t mean that things are OK. For it seems quite possible, at least to me, that China is having a “babaru” moment.
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Continue reading the main story
Wait, what? Some of us still remember the Japanese bubble economy — or as the Japanese themselves called it, the “babaru economy” — of the late 1980s, when prices of many assets, above all commercial real estate, went completely crazy. At one point it was widely claimed that the land under the Imperial Palace was worth more than the whole state of California. Then everything crashed.
By the way, I am not making fun of the Japanese for using an English-derived term. English speakers — among whom everyone from policy mandarins to business gurus finds it de rigueur to borrow foreign terminology — have no right to feel schadenfreude when someone else borrows from us.
Anyway, the bursting of the Japanese bubble didn’t lead to a financial meltdown. But it was followed by a prolonged period of economic weakness. At first many observers attributed that weakness to a hangover from previous financial excess: Japanese corporations had too much debt, they argued, or Japanese banks had too many nonperforming loans. But the weakness went on and on, and indeed in some ways continues to this day.
I don’t mean that Japan’s real economy has been consistently depressed for three decades, which you might think if you looked only at real G.D.P. The days when economic experts like (cough) Michael Crichton predicted Japanese domination of the world economy are far behind us:
Editors’ Picks
Can ‘The Wonder Years’ Break Through the White Noise of Nostalgia?
My Accidental Visit to the Pandemic’s Party Capital
A Tour of China’s Future Tiangong Space Station
Image
Rising Sun, not so much.
Rising Sun, not so much.Credit...FRED
But you need to adjust those raw numbers for demography. Thanks to low fertility plus low immigration, Japan is a shrinking society. The number of working-age adults has been falling quite fast since the 1990s. Real G.D.P. per potential worker has actually done OK, basically matching U.S. performance:
Image
But Japan looks OK given its demography.
But Japan looks OK given its demography.Credit...FRED
However, Japan has been able to maintain more or less full employment only through constant economic stimulus: ultralow interest rates and persistent budget deficits that have pushed the national debt above 200 percent of G.D.P. True, that debt hasn’t posed any problems so far, and the Japanese arguably deserve praise for managing a difficult economic situation with relatively little mass suffering.
ADVERTISEMENT
Continue reading the main story
But the point stands: Japan’s economic situation has been challenging. Why? Probably precisely because it’s a shrinking nation: Negative population growth means that there’s little demand for new housing or new office buildings, for example. So Japan has become a country awash in savings with few places to go. In hindsight, the bubble of the 1980s wasn’t so much a source of future problems as it was an unsustainable way of temporarily masking problems that were eventually going to become manifest no matter what.
And here’s the thing: While China is vastly different from Japan in many ways, China’s macroeconomic situation bears a striking resemblance to that of Japan around the time the Japanese bubble burst.
On one side, Chinese demography is looking remarkably Japanese. The working-age population peaked in 2015, and although the one-child policy that suppressed births is no longer in effect, this downward trend won’t be reversed, if at all, for many years.
On the other side, China, like Japan in the bubble years, has a highly unbalanced economy, with weak consumer spending and extremely high investment:
Image
China invests too much.
China invests too much.Credit...World Bank
Investment spending that exceeds 40 percent of G.D.P. perhaps make sense in an economy with a rapidly growing population — especially one in which millions of rural residents are moving to the cities — that is also catching up to wealthier nations in its technological advances. But China no longer has that kind of demography, and while it is still behind the West (and Japan) in overall technological prowess, productivity growth is slowing.
This means diminishing returns to investment; China needs to transition to a different model. (And Chinese officials reportedly know this.) But it keeps putting that adjustment off, pumping up spending with huge amounts of credit — which leads, inevitably, to Evergrande-type debacles.
ADVERTISEMENT
Continue reading the main story
China might paper over this current episode, as it has in the past. But sooner or later, something has to give. Evergrande may not be the moment of truth, but it is a sign that this moment is coming. And what we don’t know is whether China has the kind of social cohesion that has allowed Japan to slow down gracefully without a social and political crisis.
PAUL KRUGMAN
Wonking Out: This Might Be China’s ‘Babaru’ Moment
Sept. 24, 2021
Credit...Jade Gao/Agence France-Presse — Getty Images
Paul Krugman
By Paul Krugman
Opinion Columnist
OK, who ordered that? You’d think that between Covid-19, climate change and U.S. democracy under siege, we would already have enough crises on our plate. A potential Chinese financial meltdown is the last thing we need. Yet here we are.
The story of the moment is Evergrande, a huge, heavily indebted real estate company that appears on the edge of default. The echoes of the global financial crisis 13 years ago are obvious.
The conventional wisdom is that Evergrande isn’t another Lehman Brothers, that any fallout from its woes, and more broadly from the woes of Chinese real estate, can be contained. But that too raises disturbing memories: Some of us are old enough to remember when all the Very Serious People insisted that the fallout from the U.S. subprime debacle could be contained too.
Still, suppose that the conventional wisdom is right and that Evergrande isn’t another Lehman moment. That still won’t mean that things are OK. For it seems quite possible, at least to me, that China is having a “babaru” moment.
ADVERTISEMENT
Continue reading the main story
Wait, what? Some of us still remember the Japanese bubble economy — or as the Japanese themselves called it, the “babaru economy” — of the late 1980s, when prices of many assets, above all commercial real estate, went completely crazy. At one point it was widely claimed that the land under the Imperial Palace was worth more than the whole state of California. Then everything crashed.
By the way, I am not making fun of the Japanese for using an English-derived term. English speakers — among whom everyone from policy mandarins to business gurus finds it de rigueur to borrow foreign terminology — have no right to feel schadenfreude when someone else borrows from us.
Anyway, the bursting of the Japanese bubble didn’t lead to a financial meltdown. But it was followed by a prolonged period of economic weakness. At first many observers attributed that weakness to a hangover from previous financial excess: Japanese corporations had too much debt, they argued, or Japanese banks had too many nonperforming loans. But the weakness went on and on, and indeed in some ways continues to this day.
I don’t mean that Japan’s real economy has been consistently depressed for three decades, which you might think if you looked only at real G.D.P. The days when economic experts like (cough) Michael Crichton predicted Japanese domination of the world economy are far behind us:
Editors’ Picks
Can ‘The Wonder Years’ Break Through the White Noise of Nostalgia?
My Accidental Visit to the Pandemic’s Party Capital
A Tour of China’s Future Tiangong Space Station
Image
Rising Sun, not so much.
Rising Sun, not so much.Credit...FRED
But you need to adjust those raw numbers for demography. Thanks to low fertility plus low immigration, Japan is a shrinking society. The number of working-age adults has been falling quite fast since the 1990s. Real G.D.P. per potential worker has actually done OK, basically matching U.S. performance:
Image
But Japan looks OK given its demography.
But Japan looks OK given its demography.Credit...FRED
However, Japan has been able to maintain more or less full employment only through constant economic stimulus: ultralow interest rates and persistent budget deficits that have pushed the national debt above 200 percent of G.D.P. True, that debt hasn’t posed any problems so far, and the Japanese arguably deserve praise for managing a difficult economic situation with relatively little mass suffering.
ADVERTISEMENT
Continue reading the main story
But the point stands: Japan’s economic situation has been challenging. Why? Probably precisely because it’s a shrinking nation: Negative population growth means that there’s little demand for new housing or new office buildings, for example. So Japan has become a country awash in savings with few places to go. In hindsight, the bubble of the 1980s wasn’t so much a source of future problems as it was an unsustainable way of temporarily masking problems that were eventually going to become manifest no matter what.
And here’s the thing: While China is vastly different from Japan in many ways, China’s macroeconomic situation bears a striking resemblance to that of Japan around the time the Japanese bubble burst.
On one side, Chinese demography is looking remarkably Japanese. The working-age population peaked in 2015, and although the one-child policy that suppressed births is no longer in effect, this downward trend won’t be reversed, if at all, for many years.
On the other side, China, like Japan in the bubble years, has a highly unbalanced economy, with weak consumer spending and extremely high investment:
Image
China invests too much.
China invests too much.Credit...World Bank
Investment spending that exceeds 40 percent of G.D.P. perhaps make sense in an economy with a rapidly growing population — especially one in which millions of rural residents are moving to the cities — that is also catching up to wealthier nations in its technological advances. But China no longer has that kind of demography, and while it is still behind the West (and Japan) in overall technological prowess, productivity growth is slowing.
This means diminishing returns to investment; China needs to transition to a different model. (And Chinese officials reportedly know this.) But it keeps putting that adjustment off, pumping up spending with huge amounts of credit — which leads, inevitably, to Evergrande-type debacles.
ADVERTISEMENT
Continue reading the main story
China might paper over this current episode, as it has in the past. But sooner or later, something has to give. Evergrande may not be the moment of truth, but it is a sign that this moment is coming. And what we don’t know is whether China has the kind of social cohesion that has allowed Japan to slow down gracefully without a social and political crisis.
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